Small-cap equities often serve as the fragile hearts of the investment scene. Elevated risk levels can deliver elevated returns. Rewards stayed limited through the initial half of the 2020s, yet momentum appears to be shifting this year. We explore five small caps offering dividends from 6.5% up to 15.3%.

Small caps trailed during the prior decade. Large caps surpassed them clearly across 2016-2020 and again through 2020-2025. The accompanying chart however reveals a reversal-small caps have beaten large caps so far this year by 16% versus 11%.

A Limited Dataset Yet Small Caps May Be Reversing Course

You would not suspect this trend from major financial broadcasts or standard headlines-since coverage of small caps remains scarce.

Yet value-focused income seekers target cheap assets that can rise while distributing payments. Broader forward price-to-earnings figures show the S&P SmallCap 600 at 15.9, below both the MidCap 400 and the S&P 500.

Forward Price-to-Earnings Across Major Indexes:

S&P 500: 21.0
S&P MidCap 400: 16.4
S&P SmallCap 600: 15.9

Their oversight becomes our advantage.

By focusing on elevated yields and attractive valuations inside small caps, total-return potential improves even without broad market support. Five candidates currently stand out, averaging a robust 10.4% yield.

Newell Brands (NWL)
Dividend Yield: 8.1%

The Newell Brands (NWL) name may not stand out immediately, yet many recognize its household products: Rubbermaid storage, Crockpot and Sunbeam appliances, Mr. Coffee machines, Calphalon cookware, Yankee Candle items, Elmer's adhesives, Sharpie markers and Paper Mate writing tools. Newell also supplies Coleman outdoor equipment and Bubba drinkware.

The firm never ranked among giants, but a valuation near $25 billion a decade ago has fallen to roughly $1.5 billion, placing it firmly in small-cap range and at its lowest level since the financial crisis.

Few areas escaped trouble at Newell. Several acquisitions failed to deliver. Shrinking store traffic damaged lines such as Yankee Candle. Weak spending periods lacked strong rebounds once conditions improved.

Newell's results deteriorated. Sales have shown no growth since 2021. Net losses occurred in each of the last three years and five of the past ten. Net debt above $5 billion stayed elevated. In 2023 the firm reduced its dividend 70%, nearly matching the cut required during the crisis lows.

Unlike Prior Episodes, Shares and the Dividend Have Yet to Rebound

The overall picture looks poor, and NWL's price reflects it: shares change hands below 6 times projected earnings for the current year.

Whether factors beyond a bargain valuation exist remains uncertain, though some signs appear.

After extended declines in revenue and earnings, Newell should post modest expansion in both areas during 2026. Analysts project stronger profit growth of 15% in 2027. First-quarter results showed a narrower loss, revenue gains and improved margins, supporting those forecasts.

Given Newell's history of weak execution and ongoing economic headwinds, caution remains warranted. Further positive quarters could justify another look.

Betterware de Mexico (BWMX)
Dividend Yield: 6.5%

Newell is not alone among small-cap household names. Betterware de Mexico (BWMX) addresses similar categories-kitchen, storage and cleaning-yet follows a contrasting financial path.

Betterware sells directly to consumers across Mexico and the United States, offering organization items, beauty products and personal care goods along with laundry and cleaning supplies. Overlap exists with Newell through kitchen and food-storage lines.

Operations center on the Betterware and Jafra names, leading the firm to describe itself as BeFra. Recently it added a well-known third brand by acquiring Tupperware operating assets across Latin America.

Like Newell, BWMX rose sharply in 2021-22 before falling back, yet the moves occurred against opposite fundamentals. Revenue expanded annually since 2020, the year it became the first Mexican firm to list directly on Nasdaq. Profits fluctuated yet stayed positive each year post-listing.

While Newell continued downward, BWMX entered a sustained advance from 2023 onward, generating more than 140% total return over the past twelve months.

Even after that surge, shares trade near 8 times current-year earnings estimates.

Two considerations merit attention:

International firms often feature variable payout policies that shift yearly. Currency swings between the dollar and peso add further quarter-to-quarter movement.
Betterware operates on a direct-to-consumer model, essentially a multi-level marketing structure. Investors should proceed carefully.

Oaktree Specialty Lending (OCSL)
Dividend Yield: 11.2%

Many of the highest-yielding small caps arise from specialized areas such as business development companies, which supply debt or equity to smaller firms outside traditional banking channels.

Oaktree Specialty Lending (OCSL) provides one example.

Oaktree manages a private-debt BDC portfolio covering 163 companies. Most holdings involve senior secured loans, frequently first-lien, with floating-rate structures that benefit from rising rates yet face pressure when rates fall.

The firm targets distressed and opportunistic credit, which can prove profitable, though past risk choices produced mixed outcomes. Recent industry exposure added challenges: more than 20% in software and services once appeared favorable, yet AI-related shifts hurt several BDCs with similar concentrations.

Fiscal second-quarter net asset value declined 6% from a year earlier and 4% sequentially, partly due to software markdowns. The stock price captured these pressures, falling 16% over twelve months and 7% year-to-date. Purchase price relative to NAV moved from 87 cents on the dollar a year ago to 78 cents today.

That discount plus the 11% yield would appear attractive if the sustainability of the payout were clearer.

OCSL Has Enacted Two Dividend Reductions Within Slightly More Than a Year

BDCs must distribute at least 90% of taxable income, similar to REITs. Rather than commit to fixed high payouts that may prove unsustainable, many maintain a steady regular dividend and add specials when net investment income permits.

Oaktree rarely issues specials; recent instances coincided with cuts to the regular rate. The February 2025 reduction from 55 cents to 40 cents included a 7-cent special that later shrank and disappeared. A May announcement lowered the regular payment to 30 cents while adding 4 cents in supplements.

Oaktree has raised regular dividends and paid attractive specials during stronger periods. Until non-accrual levels decline and NAV stabilizes, the elevated yield serves more as temporary compensation than a purchase rationale.

Arko Petroleum (APC)
Dividend Yield: 10.4%

Arko Petroleum (APC) represents a newly listed security that debuted earlier this year. High payouts from recent IPOs outside REITs and BDCs remain uncommon.

In February, ARKO Corp. (ARKO), a major convenience-store operator and fuel wholesaler, spun off its wholesale, fleet-fueling and GPM Petroleum supply businesses.

The resulting public entity, Arko Petroleum, began distributions quickly with a pro-rata 26-cent payment in April, followed by a May announcement targeting 50 cents for the full second-quarter dividend. At prevailing prices this equates to a yield exceeding 10%.

Although not deeply discounted, valuation stays reasonable. Analysts forecast roughly 30% earnings growth this year and 11% next year, yet shares trade at 14 and 13 times those estimates.

Short-term risks exist. APC listed just before geopolitical tensions involving Iran, entering a period of energy-market volatility. Management notes shifts toward more frequent yet smaller purchases without clear demand destruction so far. Prolonged closure of the Strait of Hormuz through summer could alter that picture.

Arko Petroleum has navigated conditions effectively to date. Its first full quarter exceeded consensus expectations, and plans call for 20 additional NTI Fleet Fueling locations to support margins. The firm also receives 1.25% prompt-pay incentives from supply partners; rising fuel prices increase these payments and largely offset commodity exposure. This buffer helps but would not fully counter reduced pump visits.

PennyMac Mortgage Investment Trust (PMT)
Dividend Yield: 15.3%

High-yielding small caps frequently include mortgage REITs.

Mortgage REITs borrow at short-term rates to acquire mortgages and similar assets yielding long-term rates, profiting from the spread.

They benefit when short-term rates sit below long-term rates, an arrangement that usually holds, and especially when short-term rates fall while long-term rates remain steady or decline. Existing higher-rate mortgages then become more valuable than new originations.

PennyMac Mortgage Investment Trust (PMT) focuses on residential mortgage assets divided across three strategies:

Credit Sensitive Strategies: credit risk transfer agreements, subordinate mortgage-backed securities, credit-linked MBSs
Interest Rate Sensitive Strategies: mortgage servicing rights, agency MBSs, senior non-agency MBSs, collateralized mortgage obligations
Aggregation and Securitization: buying, pooling and reselling newly originated prime-credit loans

Because mREITs react more sharply to external forces such as interest rates than property-owning REITs, dividends tend to fluctuate. Reductions occur regularly, though increases follow when conditions permit. PMT has lowered its payout twice-a COVID-related cut later restored and a smaller 2022 reduction not yet reversed.